World Reports

Green Revolution?

Venezuela's Socialist Reforms Float on a Sea of Oil

With
his outspoken criticism of the US and self-proclaimed Bolivarian
Revolution – the current catchphrase now being “Fatherland, Socialism,
or Death!” – Venezuelan President Hugo Chávez has catapulted his
oil-rich country into the forefront of 21st-century geopolitics.

Among
many profound reforms to private and public life, Chávez has
implemented an ambitious series of social programs, known as Misiones,
that offer free health care, education, and subsidized food to the
country’s poor, who account for around 80 percent of the national
population.

Since coming to power in 1998, Chávez has taken
advantage of huge hikes in oil prices to fund such public works
programs. A combination of these and other factors has sent his
popularity skywards, resulting in landslide victories in every
referendum and general election that has been held during his two terms
in office.

There is much debate surrounding Chávez’s presidency
and the fundamental efficacy of the social, economic, and legislative
reforms he has implemented in the last nine years. But there is one
question that is very rarely raised in the heated debates between pro-
and anti-Chavistas: Given that climate change is now a pressing global
problem, what are the ethical implications of funding a socialist
revolution on crude oil sales?

A Booming Economy

Chávez
is by no means the first Venezuelan president to fund social programs
on oil revenue. Since the large-scale exploration and commercialization
of its massive reserves at the start of the 20th century, Venezuela has
remained highly dependent on oil as a cheap and abundant export
resource. Juan Vicente Gómez, three-time military dictator of Venezuela
from 1908 until his death in 1935, used newly discovered oil reserves
under Maracaibo Lake to finance a grand public works program, receiving
generous kickbacks in the process. Marcos Pérez Jiménez, another
dictator who held office from 1952 to 1958, transformed Venezuela into
Latin America’s most modernized country through profound economic
reform and massive oil-funded investments in infrastructure.

Today,
oil sales account for roughly 90 percent of export earnings, more than
50 percent of the federal budget revenues, and around 30 percent of GDP.
As a result, the country’s economy has always been highly susceptible
to fluctuations in market prices, and with oil now at a $76 per barrel,
Venezuela is booming.

Venezuela currently produces between 2.3
and 3.3 million barrels of crude a day, most of which is exported to
the US, China, and India. According to government figures, 474,000
barrels remain within the national borders every day for internal
consumption as gasoline or other derivatives, representing a per capita
consumption of just under half that of the US.

Climate Catch-22

Juan
Carlos Sánchez is a consultant to the Ministry of the Environment and a
university lecturer on environmental studies. He was part of the
Venezuelan UN delegation
that signed the Climate Convention in 1992 and ratified the Kyoto
Protocol in 2005. He explained that climate change represents a double
challenge for Venezuela.

Climate change
and global petroleum dependence are a Catch-22 for Venezuela. The
country could suffer environmentally, economically – or both.

“Yes, it will cause a little destruction, but not too much.”

“On
the one hand, should the climate change drastically, ecosystems would
be affected and agricultural productivity would suffer,” Sánchez says.
“And considering that 70 percent of the country’s electricity demand is
met by hydroelectric projects, power generation could significantly
fall as a result of droughts. On the other hand, if global measures are
taken to avert climate change, the oil industry could be severely
affected. A reduction in greenhouse emissions in industrialized nations
implies a net reduction in demand for hydrocarbon resources, which the
Venezuelan economy depends heavily on.”

So it’s something of a Catch-22: Venezuela looks set to suffer either environmentally or economically, or both.

But
as things stand, Venezuela is profiting considerably from the refusal
of the US to ratify the Kyoto Protocol, something for which Chávez has
(somewhat ironically) criticized George W. Bush on several occasions.
Politics aside, the current oil bonanza that Venezuela is enjoying
could be put to good use, Sánchez believes. “We have been relatively
lucky until now that the principal client for Venezuela’s crude oil is
the United States. Now is the moment for this country to invest both in
measures to reduce the internal generation of emissions, and to prepare
for a possible reduction in the global demand for oil.”

Do as I Say, Not as I Do

The last national inventory, carried out in 1998, identified that Venezuela’s CO2 emissions amount to 114 million tons annually. With nearly 27 million
inhabitants, this equates to one of Latin America’s highest per capita
rates, at roughly 60 or 70 percent that of developed nations.

Sánchez
rates Venezuela’s consumption of hydrocarbons as “very inefficient,”
citing deforestation, a lack of public awareness of the need to
conserve resources (exacerbated by heavily subsidized gas prices), a
polluting oil industry, and a transport system geared around car use as
the major factors.

Metro and tram systems have been flagship
projects of the Chávez government and have recently come online in
major cities across the country, although Sánchez describes surface
transport in Venezuela as “disastrous.” Furthermore, he criticizes the
ease of obtaining credit to purchase a car, the installation of car
production lines in Venezuela, and the low fuel efficiency of many
models on sale there.

Another major contribution to Venezuelan
greenhouse emissions is the release of methane during the oil
extraction process. Venezuela’s heavy crude reserves are mixed with
gas, and one cannot be removed from the ground without the other.
Venezuela does not capture or commercialize any of its gas reserves and
has never done so, due to the costs involved when gas is mixed with oil
and located underwater, as is the case in Maracaibo Lake. “At the
moment the most economically viable option for the oil industry is to
simply release this methane, which is one of the principal greenhouse
gases, straight into the atmosphere,” Sánchez explains, adding that
“although the economic return may not be great, capturing and selling
this gas would go some way towards reducing Venezuela’s greenhouse
emissions.”

An Emphasis on Profit

We spoke to a
consultant on the Magna Reserva exploration project in the Orinoco, the
world’s largest known heavy crude reserve, which is believed to contain
enough oil to keep Venezuela a petroleum exporter for another 200300
years at current demand rates. The consultant, who wished to remain
unnamed, described the government’s extraction plan in the Orinoco belt
as “woefully aggressive, poorly supported and hopelessly rushed,”
describing the resulting environmental devastation as “unprecedented”
in Venezuela.

“It’s pretty bad, especially now because
large-scale exploration projects are taking place in ecologically
fragile areas.” On top of that, the consultant claims that the Ministry
of the Environment is failing to carry out follow-ups to even analyze,
let alone alleviate, the impact of the oil companies’ activities in the
field. “Conservation measures are being overlooked because there’s
simply not enough time to carry them out.” (Both Environment Minister
Yuvirí Ortega Lovera, and the ministry’s Director of Environmental
Impact Assessment Vladimir Valera, declined to comment.)

But
there is no lack of environmental legislation, according to this
source. “Venezuela has been a pioneer in this field in Latin America.
The legislation exists within an excellent legal framework. The problem
lies in the government’s effectiveness to apply it.” The same goes for
environmental studies, many of which are carried out “but never
followed up,” the consultant stated.

Sánchez agrees. “Even among
state-run companies, the emphasis appears to be on profit rather than
on complying with environmental laws. You would think that the
government’s own companies would want to set the example, but this
appears not to be the case.”

Another unnamed source who worked on
a state-funded eco-efficiency project said that sound environmental
proposals are often commissioned and submitted, but then abandoned
before they are fully put into effect.

The source worked on a
paper containing proposals for environmental reforms in a popular
tourist destination west of Caracas. By addressing problems such as
refuse mismanagement, wasteful water usage, and energy inefficiency,
the proposal was designed to reduce the negative impacts of tourism on
the area.

The source claimed that in June 2006, the proposal
was presented on President Chavez’s weekly touring TV program “Aló
Presidente” as “already being fully and successfully implemented,” but
that this was “not the case at all.”

Furthermore, the source
said that on subsequent visits to the region, “a great deal of
disappointment” was evident among the local population due to the lack
of official interest in the proposals since being presented on national
television.

However, Eugenio Mora, an economist, TV presenter,
government supporter, and personal friend of Chávez, believes the
government’s environmental policy is working to good effect.

“It’s
a good policy, especially in regards to oil spills. Let’s not forget
the spill at Maracaibo Lake [in 2005], which the government is
currently in the process of cleaning up, along with the surrounding
areas.”

Mora also maintains that this government is taking action
where previous administrations did not. “Let me give you an example.
There were mining companies destroying the jungle in the Gran Sabana
(an extensive national park in southern Venezuela). The Chávez
government had them removed, which was a very controversial decision,
because they represented a lot of powerful business interests. But the
government did it in order to protect the environment.”

The Great Gas Pipeline of the South

Meanwhile,
Chávez has been busy pushing for a 5,600-mile pipeline through the
Amazon to supply southern markets such as Brazil, Argentina, and Chile
with liquefied natural gas (LNG). According to environmental groups,
the construction of the pipeline, known as the Gran Gasoducto del Sur (Great Gas Pipeline of the South), would involve deforesting huge areas
of virgin Amazonian rainforest, as well as disrupting delicate Atlantic
and Caribbean coastal ecosystems. The scale of environmental
catastrophe that this project entails is such that even directors from
participating companies such as Brazil’s Petrobras are getting cold
feet.

Mora played down the environmental consequences of the pipeline.

“It’s
not such a big thing. Yes, it will cause a little destruction, but not
too much. It’s not a whole industry we’re creating there, it’s just a
pipeline. But it’s crucial we build it for Latin American integration.
Argentina is undergoing an energy crisis, and Venezuela has the energy
to help. This would also help reduce Latin American dependence on the
United States. If these environmentalists believe in social justice,
this is the way we are going to achieve it.”

The project would
help set the Venezuelan government on its way to achieving what energy
analyst Carlos Malamud identifies as its aim to “set Latin America’s
energy agenda and, with its own criteria, lead a process of regional
integration based on energy.”

On July 27, Chávez announced that
despite his efforts, discussion on the Gas Pipeline project had come to
a standstill. “I can’t force this pipeline onto the South,” the
Venezuelan leader lamented in a live televised broadcast.

He did
not comment on the reasons for the halt in progress, leaving analysts
to conjecture that a combination of environmental, economic, and
political concerns were the cause for international disagreement over
the pipeline. Chávez’s comments, however, reveal a strong conviction to
push ahead with the pipeline should an agreement be reached with
members of South American trade bloc Mercosur. For now, it appears that
environmental concerns represent an inconvenient snag to Chávez’s
vision of a unified Latin America.

REUTERSChávez is by no means the first Venezuelan leader to fund social programs on oil revenues. For nearly 100 years, Venezuelan development has rested on petroleum.

‘We Live for Oil’

So does Venezuela have any responsibility not to sell its crude to the world?

“Responsibility
lies primarily with consumer nations,” Sánchez says. “But Venezuela, as
a major exporter of hydrocarbons, has a moral duty to invest in
eco-projects in order to project an image of environmental
responsibility to the world.” He describes the government’s overall
approach to climate change as “short-sighted,” referring to the
administration’s apparent belief that “climate change doesn’t affect
us, and we have so many resources that there is no need to worry about
these things yet. The world wants us to produce more and more oil and
is paying us ever greater sums to do so.”

“I sincerely hope that this changes very soon,” he concluded.

Mora says that curtailing petroleum exports is not an option.

“In
Venezuela, we live for oil. We have no other way to generate an income.
[Not selling oil] would have a horrible effect on our economy. We are
taking steps in diversifying our economy, specifically in the
aluminium, steel, and agricultural sectors. But it’s a long process,
which will take at least 40 years. So for now we need oil. Venezuela
starts and ends with (state oil company) PDVSA.”

The Magna
Reserva consultant was less circumspect. “It’s a complete joke. The
only thing propping this government up is the influx of dollars coming
in every day from crude oil sales. They can’t afford to hold back on a
single barrel. If oil prices were to drop, this government would
collapse instantly.”

Luckily for Chávez, oil prices remain sky
high, and with industrialized nations apparently unable to meet even
the most lenient targets for emissions reductions, demand is set to
continue climbing. Only a concerted and sustained effort to curb
consumption and turn to renewable fuels could change that. But with the
flurry of trade deals that Venezuela signed last year with China –
principally on energy issues – demand for Venezuelan crude looks
unlikely to drop any time soon.

Until then, it’s “Fatherland, Socialism, or Death!” all the way to the bank – just don’t mention the environment.

Sebastian
Kennedy is a freelance journalist based in Caracas. He worked for a
year as correspondent for Venezuela’s English newspaper, The Daily Journal. Martin Markovits is a freelance journalist who spent the past 18 months as one of the main political journalists for The Daily Journal. He covered the 2006 Mexican elections from Mexico City.